Andy and Cathy are in the sporting good industry. Andy has developed a new lightweight soccer goal and is trying to decide whether to sell it at a high price or a low price. Selling the good at a higher price will provide higher profits but might entice Cathy to develop and sell a competing lightweight soccer goal. A lower price could deter entry from Cathy. After Andy sets his price, Cathy must decide to enter the market for the new lightweight soccer goal or not. Assume that both Andy and Cathy must make at least $5,000 to make the investment worthwhile. Which price will Andy charge? high price low price What will Cathy do as a result of Andy's choice? Cathy will enter the market. O Cathy will not enter the market. Indicate each person's final profit. Andy's profit: $ 7000 Cathy's profit: $ 7000 Andy: charges high or low price Andy charges the high price Andy charges the low price Cathy: enter or do not enter Cathy: enter or do not enter Cathy Andy enters $9,000 Cathy does not enter Cathy enters Cathy does not enter Cathy $9,000 Andy Cathy $18,000 Andy Cathy $7,000 $7,000 Cathy Andy $14,000

Andy and Cathy are in the sporting good industry. Andy has developed a new lightweight soccer goal and is trying to decide whether to sell it at a high price or a low price. Selling the good at a higher price will provide higher profits but might entice Cathy to develop and sell a competing lightweight soccer goal. A lower price could deter entry from Cathy. After Andy sets his price, Cathy must decide to enter the market for the new lightweight soccer goal or not. Assume that both Andy and Cathy must make at least $5,000 to make the investment worthwhile. Which price will Andy charge? high price low price What will Cathy do as a result of Andy's choice? Cathy will enter the market. O Cathy will not enter the market. Indicate each person's final profit. Andy's profit: $ 7000 Cathy's profit: $ 7000 Andy: charges high or low price Andy charges the high price Andy charges the low price Cathy: enter or do not enter Cathy: enter or do not enter Cathy Andy enters $9,000 Cathy does not enter Cathy enters Cathy does not enter Cathy $9,000 Andy Cathy $18,000 Andy Cathy $7,000 $7,000 Cathy Andy $14,000

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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